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QUESTION:
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Can I Retire Early | I am a Viet Nam Veteran who at age 57 has worked for the same employer for 35 years and is vested in a 401k with over 350,000.00. I am a divorcee ( without attachment to my pension, no alimony, no children ) who is finding it hard to afford to live where I am, therefore I would like to move where it is more affordable, but I do not know if I can afford that either due to the following, so my questions are:
1. Can I leave the job ( take early retirement without drawing on 401k ) rolling over my 401k into an IRA and leave it there till I am retirement age of 62 when I will also be able to collect my social security ?
2. And, or can I draw any % of the 401k monies when I do leave, leaving the balance in the IRA till age 62 ?
3. What penalities, interest or taxes may incur on either senerio ?
I plan to live with a friend working part time and living off equity resulting from sale of my home till age 62 if feasible !
Thank You |  | asked by navybill, 8/27/2008 |
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Categories:
401k, Early Retirement
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| ANSWERS: | | Answered by: Editorial, 08/28/08
Overall Rating:   | Well, the good news is that you seem to have a good working knowledge of some of the constraints and issues surrounding retirement. Retiring with financial security is challenging. But, you indeed have a very good base.
To start, the biggest issue that I have not seen you address is healthcare. If you retire at age 57, health insurance may be a very very very substantial out of pocket cost. I strongly encourage you to investigate your healthcare options -- either by extending your employer's healthcare with Cobra or by purchasing private insurance.
Medicare is not available to you until age 65. However, you may have veteran's benefits. Another resource for you is your local Veteran's Administration Office.
To more specifically answer your questions:
1) Yes, you should be able to leave your job without drawing on your 401k. However, it is probably a good idea to roll it over into an IRA. This article discusses many of the issues surrounding 401k Rollovers and I encourage you to review it: http://www.newretirement.com/Services/Rollover_Guide.aspx
2 and 3) Withdrawals on a Traditional IRA (also known as distributions) can begin at age 59 1/2 and are mandatory by 70 1/2. (Withdrawals before age 59 and a half are usually subject to a 10 percent penalty.) So, you probably don't want to withdraw anything until that age.
Retirement planning is not really something that you should do all on your own. It is just too risky. And, you have sufficient assets to warrent some outside help.
NewRetirement offers a few services that may interest you. We have put together a matching calculator to help you find the right 401k Rollover product. Use the calculator here:
https://www.newretirement.com/Services/Find_Rollover_3_Steps.aspx
You may also want to get matched to a Financial Planner:
https://www.newretirement.com/Services/Professional_Financial_Advisors_Advice.aspx
Finally, please review our general guide to retirement financial planning. It may make you more aware of some of the main issues you will be facing:
http://www.newretirement.com/Services/Retirement_Risks.aspx
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